Although natural gas comprises 2% of China’s current electricity mix, that share must increase if China is to meet its ambitious climate and air quality goals. In this study, commissioned by RAP and published in “Energy Review Strategies,” the authors modeled how changes in the price of natural gas relative to coal, the capital cost of natural gas power plants relative to coal power plants, and a carbon price would make natural gas cost-competitive in baseload, load following, and peaking applications in China. Natural gas is already cost-competitive for peaking, but government agencies must adjust current methods of compensating generators in order to bring more gas peakers online. Natural gas load following and baseload generation are not currently cost-competitive, but could become so with relatively modest decreases in both capital costs and fuel prices, especially if a small price was imposed on carbon emissions. A government policy of indigenizing natural gas turbine technology could reduce capital costs, which is the primary factor in making gas cost-competitive for load following with relatively low capacity factors. Reforms in the natural gas supply industry, a carbon price, and fundamental changes in electricity wholesale pricing could make gas competitive as a baseload resource.
Strategies for Expanding Natural Gas-Fired Electricity Generation in China: Economics and Policy
May 31, 2013
- By
- Fredrich (Fritz) Kahrl ,
- Jim Williams ,
- Gabe Kwok ,
- Hu Junfeng